11
Swedish Banks Redeeming Latvia Unit Debt, Draft Shows
Swedish Banks Redeeming Latvia Unit Debt, Draft Shows (Update3) – Bloomberg.com
Swedish Banks Redeeming Latvia Unit Debt, Draft Shows (Update3)
By Aaron Eglitis and Meera Louis
July 7 (Bloomberg) — Swedish banks, the Baltic region’s biggest lenders, may be compromising the success of Latvia’s bailout program by failing to roll over funding to their units in the country, a European Commission document shows.
“There is an indication that Swedish daughter banks may be repaying loans to their parent banks, creating significant euro outflows,” according to the confidential draft document obtained by Bloomberg News and dated June 14. “The successful implementation of the program may be compromised if euro liquidity is drained out of the country.”
Latvia needs Sweden’s banks in the Baltics to increase lending and help avert a deeper recession than the 18 percent contraction the government forecasts for this year. If banks have inadequate funds to lend, a 7.5 billion-euro ($10.4 billion) loan from a group led by the European Union, the International Monetary Fund and the Swedish government may prove insufficient to lift the economy out of recession.
“This risk needs to be properly addressed at a meeting with the Swedish parent banks which would commit to maintaining their level of exposure to Latvia,” according to the draft document.
There are no comments.